[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2153 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 2153

  To require certain expenditures by the Federal Reserve System to be 
     made subject to congressional appropriations, to prohibit the 
 maintenance of surplus accounts by Federal reserve banks, to provide 
   for annual independent audits of Federal reserve banks, to apply 
   Federal procurement regulations to the Federal Reserve System, to 
reform the pricing practices of the Federal Reserve System for services 
    provided to the domestic banking system, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 10, 1998

 Mr. Dorgan (for himself and Mr. Reid) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           and Urban Affairs

_______________________________________________________________________

                                 A BILL


 
  To require certain expenditures by the Federal Reserve System to be 
     made subject to congressional appropriations, to prohibit the 
 maintenance of surplus accounts by Federal reserve banks, to provide 
   for annual independent audits of Federal reserve banks, to apply 
   Federal procurement regulations to the Federal Reserve System, to 
reform the pricing practices of the Federal Reserve System for services 
    provided to the domestic banking system, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Federal Reserve Fiscal 
Accountability Act of 1998''.

SEC. 2. DEFINITIONS.

    For purposes of this Act--
            (1) the term ``Board'' means the Board of Governors of the 
        Federal Reserve System; and
            (2) the term ``Federal reserve bank'' has the same meaning 
        as in the third undesignated paragraph of section 1 of the 
        Federal Reserve Act.

SEC. 3. NON-MONETARY POLICY SPENDING SUBJECT TO CONGRESSIONAL 
              APPROPRIATIONS.

    (a) Determination by Comptroller General.--
            (1) In general.--The Comptroller General of the United 
        States, in consultation with the Board, shall specifically 
        identify the functions and activities of the Board and of each 
        Federal reserve bank that are directly related to the 
        establishment and conduct of the monetary policy of the United 
        States.
            (2) Report.--Not later than 6 months after the date of 
        enactment of this Act, the Comptroller General of the United 
        States shall submit a report to the Congress containing the 
        information referred to in paragraph (1).
    (b) Certain Spending Subject to Appropriations.--
            (1) In general.--Beginning with the first fiscal year that 
        commences after the date on which the report referred to in 
        subsection (a) is submitted to the Congress, and in each fiscal 
        year thereafter, all expenditures by the Board or any Federal 
        reserve bank shall be made only as provided in advance in an 
        appropriations Act.
            (2) Exception.--Notwithstanding paragraph (1), funds used 
        to pay expenditures directly related to the establishment and 
        conduct of monetary policy, as identified under subsection (a), 
        shall not be subject to appropriations in advance.
    (c) Annual Report.--Not later than 6 months after the end of each 
fiscal year to which subsection (b) applies, the Comptroller General of 
the United States shall submit a report to the Congress on the 
compliance of the Board and the Federal reserve banks with the 
requirements of this section during the preceding fiscal year.

SEC. 4. TREATMENT OF SURPLUS ACCOUNT.

    (a) Termination of Surplus Account Authorization.--
            (1) Amendments to the federal reserve act.--Section 7(a) of 
        the Federal Reserve Act (12 U.S.C. 289) is amended--
                    (A) in the subsection heading, by striking ``and 
                Surplus Funds'';
                    (B) by striking paragraphs (2) and (3);
                    (C) in paragraph (1)--
                            (i) by striking ``(1) Stockholder 
                        dividends.--''; and
                            (ii) by redesignating subparagraphs (A) and 
                        (B) as paragraphs (1) and (2), respectively, 
                        and moving the margins 2 ems to the left; and
                    (D) in paragraph (2), as redesignated, by striking 
                ``subparagraph (A)'' and inserting ``paragraph (1)''.
            (2) Return of funds.--Not later than 30 days after the date 
        of enactment of this Act, each Federal reserve bank shall 
        transfer to the Board for transfer to the Secretary of the 
        Treasury for deposit in the general fund of the Treasury, all 
        funds held on the date of enactment of this Act by that Federal 
        reserve bank in a surplus account established under section 
        7(a) of the Federal Reserve Act, as that section existed on the 
        day before the date of enactment of this Act.
    (b) Determination by Comptroller General.--
            (1) In general.--The Comptroller General of the United 
        States shall determine what percentage, if any, of the net 
        earnings of the Federal reserve banks should be transferred on 
        an annual basis to the Secretary of the Treasury for deposit in 
the general fund of the Treasury.
            (2) Report.--Not later than 6 months after the date of 
        enactment of this Act, the Comptroller General of the United 
        States shall report its determination under paragraph (1) to 
        the Congress, together with any recommendations for necessary 
        legislative action.

SEC. 5. ANNUAL INDEPENDENT AUDITS OF RESERVE BANKS.

    (a) Audit Required.--Each Federal reserve bank shall annually 
obtain an audit using generally accepted accounting principles from an 
independent auditor that meets the requirements of subsection (b).
    (b) Auditor's Qualifications.--The independent auditor referred to 
in subsection (a) shall--
            (1) be a certified public accountant who is independent of 
        the Federal Reserve System; and
            (2) meet any other qualifications that the Board may 
        establish.
    (c)  Certification Required.--In each audit required under 
subsection (a), the auditor shall certify to the Federal reserve bank 
and the Board, under penalty of perjury that the auditor--
            (1) is a certified public accountant and is independent of 
        the Federal Reserve System; and
            (2) conducted the audit using generally accepted auditing 
        principles.
    (d) Certification by Federal Reserve Bank.--Not later than 30 days 
after the completion of each audit required under subsection (a), the 
Federal reserve bank shall provide to the Comptroller General of the 
United States--
            (1) a certification, under penalty of perjury, that--
                    (A) the Federal reserve bank has obtained the audit 
                required under subsection (a);
                    (B) the Federal reserve bank has received the 
                certifications of the auditor required under subsection 
                (c); and
                    (C) the audit fully complies with subsection (a); 
                and
            (2) proof that the Federal reserve bank and the Board have 
        each received a copy of the audit report.
    (e) Detection of Illegal Acts.--
            (1) Audit procedures.--Each audit required by this section 
        shall include procedures designed to provide reasonable 
        assurances of detecting illegal acts that would have an effect 
        on the determination of financial statement amounts.
            (2) Reporting possible illegalities.--If, in the course of 
        conducting an audit required by this section, the independent 
        auditor detects or otherwise becomes aware of information 
        indicating that an illegal act (whether or not perceived to 
        have an effect on the financial statements of the Federal 
        reserve bank) has or may have occurred, the auditor--
                    (A) shall determine whether it is likely that the 
                illegal act has occurred; and
                    (B) shall, if the auditor determines that the 
                illegal act is likely to have occurred--
                            (i) determine and consider the possible 
                        effect of the illegal act on the financial 
                        statements of the Federal reserve bank; and
                            (ii) as soon as practicable, inform the 
                        Board that an illegal act is likely to have 
                        occurred or has otherwise come to the attention 
                        of the auditor.
            (3) Report to comptroller general.--The independent auditor 
        under this section shall, as soon as practicable, directly 
        report its conclusions to the Comptroller General of the United 
        States with regard to any possible illegal act that has been 
        detected or has otherwise come to the attention of the auditor 
        during the course of the audit required by this section, if, 
        after determining that the Board is adequately informed with 
        respect to such possible illegal act, the auditor concludes 
        that--
                    (A) the possible illegal act has an effect on the 
                financial statements of the Federal reserve bank;
                    (B) the Board has not taken timely and appropriate 
                remedial actions with respect to the possible illegal 
                act; and
                    (C) the failure to take remedial action is 
                reasonably expected to warrant departure from a 
                standard report of the auditor when made, or warrant 
                resignation from the audit engagement.
            (4) Resignation of auditor.--If an independent auditor 
        resigns from its engagement to audit a Federal reserve bank 
        under paragraph (3), the auditor shall furnish to the 
        Comptroller General of the United States, not later than 1 
        business day after such resignation, a copy of the report of 
        the auditor (or documentation of any oral report given).
    (f) Compliance With Fee Schedule Requirements.--
            (1) In general.--As part of each audit of a Federal reserve 
        bank required by this section, the auditor shall make a 
        determination of whether, in the opinion of the auditor, the 
        Federal reserve bank is meeting the requirements of section 
        11A(c)(3) of the Federal Reserve Act (as amended by this Act) 
        with respect to each service referred to in section 11A(b) of 
        the Federal Reserve Act (as amended by this Act).
            (2) Report to board.--The auditor shall report its 
        determinations under paragraph (1) to the Board in written 
        form.
            (3) Report to congress.--The Board shall annually compile 
        reports received under paragraph (2) and annually submit those 
        reports to the Congress.
    (g) Recordkeeping.--To facilitate compliance with this section, 
each Federal reserve bank shall--
            (1) ensure that the books, records, and accounts of the 
        Federal reserve bank are maintained and kept in sufficient 
        detail to accurately and fairly reflect the transactions and 
        dispositions of the assets of the bank;
            (2) devise and maintain a system of internal accounting 
        controls sufficient to provide reasonable assurances that 
        transactions are recorded as necessary to permit preparation of 
        financial statements in conformity with generally accepted 
        accounting principles and to maintain accountability for 
        assets;
            (3) ensure that access to assets of the Federal reserve 
        bank is permitted only in accordance with the general or 
        specific authorization of the Board; and
            (4) ensure that--
                    (A) the recorded accountability for assets is 
                compared with the existing assets at reasonable 
                intervals; and
                    (B) appropriate action is taken with respect to any 
                differences.
    (h) Reports to Board.--Not later than December 31 of each year, 
each Federal reserve bank shall submit a copy of each audit conducted 
under this section to the Board.

SEC. 6 INDEPENDENT AUDITS OF FEDERAL RESERVE SYSTEM AND FEDERAL RESERVE 
              BOARD.

    (a) Audit of Reserve System.--The Board, in consultation with the 
Comptroller General of the United States, shall annually obtain an 
audit of the consolidated financial statements of the Federal Reserve 
System from an independent auditor, using generally accepted accounting 
principles, based on reports of audits of Federal reserve banks 
submitted to the Board under section 5(h) and the audit of the Board 
under subsection (b) of this section.
    (b) Audit of Board.--
            (1) In general.--The Board shall annually obtain an 
        evaluation of the management and administration of the Board 
        and an audit of the financial statements of the Board from an 
        independent auditor, using generally accepted accounting 
        principles.
            (2) Fee schedule considerations.--
                    (A) In general.--As part of each audit of the Board 
                required by this subsection, the auditor shall make a 
                determination of whether, in the opinion of the 
                auditor, the Board has prescribed fee schedules under 
                section 11A(b) of the Federal Reserve Act (as amended 
                by this Act) based on information contained in the 
                reports submitted to the Board under section 5(f) of 
                this Act.
                    (B) Report to board.--The auditor shall report its 
                determinations under subparagraph (A) to the Board in 
                written form.
            (3) Availability to the public.--The results of each 
        evaluation and audit performed in accordance with this 
        subsection shall be made available to the public.
            (4) Limitation.--The evaluations and audits required by 
        this subsection shall be conducted in a manner that does not 
        impair or otherwise directly affect any monetary policy 
        function of the Board.
    (c) Auditor's Qualifications.--An independent auditor referred to 
in subsections (a) and (b) shall--
            (1) be a certified public accountant who is independent of 
        the Federal Reserve System; and
            (2) meet any other qualifications that the Board may 
        establish.
    (d)  Certification Required.--In each audit required under this 
section, the auditor shall certify to the Board, under penalty of 
perjury that the auditor--
            (1) is a certified public accountant and is independent of 
        the Federal Reserve System; and
            (2) conducted the audit using generally accepted auditing 
        principles.
    (e) Detection of Illegal Acts.--
            (1) Audit procedures.--Each audit required by this section 
        shall include procedures designed to provide reasonable 
        assurances of detecting illegal acts that would have an effect 
        on the determination of financial statement amounts.
            (2) Reporting possible illegalities.--If, in the course of 
        conducting an audit of the Federal Reserve System or the Board 
        required by this section, the independent auditor detects or 
        otherwise becomes aware of information indicating that an 
        illegal act has or may have occurred, the auditor--
                    (A) shall determine whether it is likely that the 
                illegal act has occurred; and
                    (B) shall, if the auditor determines that the 
                illegal act is likely to have occurred--
                            (i) determine and consider the possible 
                        effect of the illegal act on the financial 
                        statements of the Federal Reserve System or the 
                        Board, as applicable; and
                            (ii) as soon as practicable, inform the 
                        Board that an illegal act is likely to have 
                        occurred or has otherwise come to the attention 
                        of the auditor.
            (3) Report to comptroller general.--An independent auditor 
        under this section shall, as soon as practicable, directly 
        report its conclusions to the Comptroller General of the United 
        States with regard to any possible illegal act that has been 
        detected or has otherwise come to the attention of the auditor 
        during the course of an audit of the Federal Reserve System or 
        the Board required by this section, if, after determining that 
        the Board is adequately informed with respect to such possible 
        illegal act, the auditor concludes that--
                    (A) the possible illegal act has an effect on the 
                financial statements of the Federal Reserve System or 
                the Board, as applicable;
                    (B) the Board has not taken timely and appropriate 
                remedial actions with respect to the possible illegal 
                act; and
                    (C) the failure to take remedial action is 
                reasonably expected to warrant departure from a 
                standard report of the auditor when made, or warrant 
                resignation from the audit engagement.
            (4) Resignation of auditor.--If an independent auditor 
        resigns from its engagement to audit the Federal Reserve System 
        or the Board under paragraph (3), the auditor shall furnish to 
        the Comptroller General of the United States, not later than 1 
        business day after such resignation, a copy of the report of 
        the auditor (or documentation of any oral report given).
    (f) Recordkeeping.--To facilitate compliance with this section, the 
Board shall--
            (1) ensure that the books, records, and accounts of the 
        Board are maintained and kept in sufficient detail to 
        accurately and fairly reflect the transactions and dispositions 
        of assets;
            (2) devise and maintain a system of internal accounting 
        controls sufficient to provide reasonable assurances that 
        transactions are recorded as necessary to permit preparation of 
        financial statements in conformity with generally accepted 
        accounting principles and to maintain accountability for 
        assets;
            (3) ensure that access to assets of the Board is permitted 
        only in accordance with the general or specific authorization 
        of the Board; and
            (4) ensure that--
                    (A) the recorded accountability for assets is 
                compared with the existing assets at reasonable 
                intervals; and
                    (B) appropriate action is taken with respect to any 
                differences.

SEC. 7. APPLICABILITY OF FEDERAL PROCUREMENT PROCEDURES.

    Beginning on the first day of the first fiscal year following the 
date of enactment of this Act, the following provisions of law apply to 
the Board and to each Federal reserve bank as if the Board and such 
banks were executive agencies for the purposes of such provisions of 
law:
            (1) Title III of the Federal Property and Administrative 
        Services Act of 1949 (41 U.S.C. 251 et seq.).
            (2) The Brooks Architect-Engineers Act (40 U.S.C. 541 et 
        seq.).
            (3) The Office of Federal Procurement Policy Act (41 U.S.C. 
        401 et seq.).
            (4) The Clinger-Cohen Act of 1996 (Division E of Public Law 
        104-106; 40 U.S.C. 1401 et seq.).

SEC. 8. AMENDMENTS RELATING TO FEDERAL RESERVE ACT.

    (a) Clarification of Fee Schedule Requirements.--
            (1) In general.--Section 11A(b) of the Federal Reserve Act 
        (12 U.S.C. 248a(b)) is amended--
                    (A) by redesignating paragraphs (4) through (8) as 
                paragraphs (5) through (9), respectively; and
                    (B) by inserting after paragraph (3) the following 
                new paragraph:
            ``(4) transportation of paper checks in the clearing 
        process;''.
            (2) Publication of revised schedule.--Not later than 60 
        days after the date of enactment of this Act, the Board shall 
        publish a revision of the schedule of fees required under 
        section 11A of the Federal Reserve Act that reflects the 
        changes made in the schedule in accordance with the amendments 
        made by paragraph (1) of this subsection.
    (b) Clarification of Applicable Pricing Criteria.--
            (1) In general.--Section 11A(c) of the Federal Reserve Act 
        (12 U.S.C. 248a(c)) is amended by striking paragraph (3) and 
        inserting the following:
            ``(3)(A) In each fiscal year, fees shall be established for 
        each service provided by the Federal reserve banks on the basis 
        of all direct and indirect costs actually incurred (excluding 
        the effect of any pension cost credit) in providing each of the 
        services, including interest on items credited prior to actual 
        collection, overhead, and an allocation of imputed costs, which 
        takes into account the taxes that would have been paid and the 
        return on capital that would have been provided had the 
        services been provided by a private business firm.
            ``(B) The pricing principles referred to in subparagraph 
        (A) shall be carried out with due regard to competitive factors 
        and the provision of an adequate level of such services 
        nationwide.''.
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